Protecting co-debtors in bankruptcy


At some point in our lives, we usually need somebody to co-sign on a loan with us. In 2003 I returned home from a two year mission with my church in India. When I got home, I had no car, no job, and no credit. After a few months of looking I finally found a job- but I had no way to get there. Fortunately, my mom agreed to co-sign on a vehicle loan with me. This not only helped me find a reliable source of transportation- but also helped me to successfully build my credit.

A cosigner (sometimes referred as a ‘co-debtor’ in bankruptcy) is usually a friend or family member who agrees to be responsibleĀ for another person’s debt, which involves a legal obligation made by the cosigner to make payment on the other person’s debt should that person default.

Whether you are the cosigner of the debt, or a debtor intending to file for bankruptcy protection, know that a bankruptcy filing ultimately affects both of you. In a Chapter 7 case, eligible debts are discharged and the debtor is protected from creditors by the bankruptcy filing. Unfortunately, the cosigner is not protected by the debtor’s bankruptcy filing. The creditor can still contact, make demands, and even file suit against the co-signer. It is important to let family members know how this will impact them.

Cases filed under Chapter 13 also provides protection for cosigners of consumer debts. As you may know, when you file bankruptcy, the Bankruptcy Court enters an Order of Relief forbidding creditors to continue to collect or even contact the debtor. When filed under Chapter 13, this stay protects the debtor and the cosigner. While the automatic stay is in place, creditors will be prohibited from trying to collect on the co-signed debt from either party. The only catch is that the debtor must propose terms to pay back the creditor as a part of their Chapter 13 Plan, or the creditor can ask the Bankruptcy Court to allow them to start collecting from the co-signer.

If you are thinking about bankruptcy and the impact it will have on your family members, it is important to talk to an experienced bankruptcy attorney to assess your options. Chapter 13 may be a way for you to get the relief you are seeking, and also protect your family members from the effects of your bankruptcy.

About Jason

My name is Jason Richards, and I am an attorney in Northern Utah. I run my own practice and have offices in Ogden and North Salt Lake. I grew up in Ogden and attended local public schools. I graduated from the University of Utah Law School with a juris doctorate degree. My practice primarily centralizes on bankruptcy and debt collection. I also specialize in criminal defense and other areas of civil litigation. I represent clients who are suffering from crushing debt that seems hopeless. I have helped many people file for relief under Chapter 7 and Chapter 13 of the United States Bankruptcy Code. I have also helped dozens of clients renegotiate their debt and defend them in debt collection actions with ruthless creditors. If not dealt with promptly and aggressively, creditors will achieve their goal to collect. Bankruptcy is certainly not the solution for everyone. Everybody's situation is different. The best way for you to determine if it is right for you is by consulting with a local bankruptcy attorney. Bankruptcy has helped millions of Americans receive a fresh start and financial independence.
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1 Response to Protecting co-debtors in bankruptcy

  1. LaksmiPanth says:

    Oh ! its a great job. Your posting is really true as well as helpful for all. These key factors must need to in consideration to sale our home. Thank you for sharing with us.keep it up.

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